================================================================================

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   ----------


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1997    Commission file number 1-27


                                   TEXACO INC.
           (Exact name of the registrant as specified in its charter)


          Delaware                                               74-1383447
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


        2000 Westchester Avenue
        White Plains, New York                                    10650
(Address of principal executive offices)                        (Zip Code)



        Registrant's telephone number, including area code (914) 253-4000


                                   ----------

     Texaco Inc. (1) HAS FILED all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) HAS BEEN subject to such filing requirements for the past 90 days.

     As of October 31, 1997, there were outstanding 529,018,839 shares of Texaco
Inc. Common Stock - par value $3.125.

================================================================================
<PAGE>

                         PART I - FINANCIAL INFORMATION

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                        STATEMENT OF CONSOLIDATED INCOME
         FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
         ---------------------------------------------------------------
                 (Millions of dollars, except per share amounts)

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                       -------------------------------------------------
                                                                        For the nine months         For the three months
                                                                        ended September 30,          ended September 30,
                                                                        -------------------          -------------------
                                                                         1997           1996          1997           1996

                                                                         ----           ----          ----           ----

<S>                                                                    <C>            <C>           <C>            <C>    
         REVENUES
              Sales and services                                       $33,630        $31,777       $10,834        $10,901
              Equity in income of affiliates, interest,
                 asset sales and other                                     988            852           259            196
                                                                       -------        -------       -------        -------
                                                                        34,618         32,629        11,093         11,097
                                                                       -------        -------       -------        -------
         DEDUCTIONS
              Purchases and other costs                                 26,324         24,526         8,355          8,399
              Operating expenses                                         2,184          2,105           740            721
              Selling, general and administrative expenses               1,219          1,205           427            406
              Maintenance and repairs                                      260            266            89             88
              Exploratory expenses                                         306            243           114             84
              Depreciation, depletion and amortization                   1,145          1,068           388            364
              Interest expense                                             309            328           106            107
              Taxes other than income taxes                                365            361            97            129
              Minority interest                                             54             50            17             17
                                                                       -------        -------       -------        -------
                                                                        32,166         30,152         10,333        10,315
                                                                       -------        -------       -------        -------
         Income before income taxes                                      2,452          2,477           760            782

         Provision for income taxes                                        411            968           270            348
                                                                       -------        -------       -------        -------

         NET INCOME                                                    $ 2,041        $ 1,509        $  490        $   434
                                                                       =======        =======        ======        =======

         Preferred stock dividend requirements                         $   (42)       $   (43)       $  (14)       $   (14)
                                                                       -------        -------       -------        -------

         Net income available for common stock                         $ 1,999        $ 1,466        $  476        $   420
                                                                       =======        =======        ======        =======

         Per common share (dollars)(a)
              Net income                                               $  3.84        $  2.81        $  .91        $   .80

              Cash dividends paid                                      $  1.30        $ 1.225        $  .45        $  .425

         Average number of common shares outstanding
              for computation of earnings per share
              (thousands) (a)                                          520,356        521,451       520,745        521,515



<FN>

         (a) Reflects two-for-one stock split, effective September 29, 1997.





          See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                      - 1 -

<PAGE>

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEET
                 AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
                 ----------------------------------------------
                              (Millions of dollars)
<TABLE>
<CAPTION>
                                                                                       September 30,             December 31,
                                                                                           1997                     1996
                                                                                        ------------             ------------
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                          <C>                    <C>    
ASSETS
   Current Assets
      Cash and cash equivalents                                                              $   451                $   511
      Short-term investments - at fair value                                                      48                     41
      Accounts and notes receivable, less allowance for doubtful
           accounts of  $22 million in 1997 and $34 million in 1996                            3,999                  5,195
      Inventories                                                                              1,537                  1,460
      Deferred income taxes and other current assets                                             283                    458
                                                                                             -------                -------
           Total current assets                                                                6,318                  7,665

   Investments and Advances                                                                    5,439                  4,996

   Properties, Plant and Equipment - at cost                                                  35,291                 33,988
   Less - accumulated depreciation, depletion and amortization                                21,198                 20,577
                                                                                             -------                -------
      Net properties, plant and equipment                                                     14,093                 13,411

   Deferred Charges                                                                              965                    891
                                                                                             -------                -------

           Total                                                                             $26,815                $26,963
                                                                                             =======                =======

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
      Short-term debt                                                                        $   521                $   465
      Accounts payable and accrued liabilities
         Trade liabilities                                                                     2,527                  3,472
         Accrued liabilities                                                                   1,291                  1,333
      Estimated income and other taxes                                                         1,205                    914
                                                                                             -------                -------
           Total current liabilities                                                           5,544                  6,184

   Long-Term Debt and Capital Lease Obligations                                                5,116                  5,125
   Deferred Income Taxes                                                                         808                    795
   Employee Retirement Benefits                                                                1,208                  1,236
   Deferred Credits and Other Noncurrent Liabilities                                           1,873                  2,593
   Minority Interest in Subsidiary Companies                                                     649                    658
                                                                                             -------                -------
           Total                                                                              15,198                 16,591
   Stockholders' Equity
      Market Auction Preferred Shares                                                            300                    300
      ESOP Convertible Preferred Stock                                                           459                    474
      Unearned employee compensation and benefit plan trust                                     (376)                  (378)
      Common stock (authorized: 700,000,000 shares, $3.125 par
           value; 548,586,834 shares issued - See Note 5)                                      1,714                  1,714
      Paid-in capital in excess of par value                                                     616                    630
      Retained earnings                                                                        9,628                  8,292
      Currency translation adjustment                                                           (102)                   (65)
      Unrealized net gain on investments                                                          40                     33
                                                                                             -------                -------
                                                                                              12,279                 11,000
      Less - Common stock held in treasury, at cost                                              662                    628
                                                                                             -------                -------
         Total stockholders' equity                                                           11,617                 10,372
                                                                                             -------                -------

           Total                                                                             $26,815                $26,963
                                                                                             =======                =======


<FN>
          See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                       -2-

<PAGE>

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                 CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                              (Millions of dollars)
<TABLE>
<CAPTION>
                                                                                                   (Unaudited)
                                                                                              -----------------------
                                                                                               For the nine months
                                                                                               ended September 30,
                                                                                              -----------------------
                                                                                              1997               1996
                                                                                              ----               ----
<S>                                                                                          <C>                <C>   
OPERATING ACTIVITIES
   Net income                                                                                $2,041            $1,509
    Reconciliation to net cash provided by (used in)
      operating activities
         Depreciation, depletion and amortization                                             1,145             1,068
         Deferred income taxes                                                                  196               108
         Exploratory expenses                                                                   306               243
         Minority interest in net income                                                         54                50
         Dividends from affiliates, greater than (less than)
            equity in income                                                                   (272)              141
         Gains on asset sales                                                                  (295)              (49)
         Changes in operating working capital                                                    15                36
         Other - net                                                                           (144)              (55)
                                                                                             ------            ------
            Net cash provided by operating activities                                         3,046             3,051

INVESTING ACTIVITIES
   Capital and exploratory expenditures                                                      (2,506)           (2,001)
   Proceeds from sale of discontinued operations, net of
      cash and cash equivalents sold                                                            --                344
   Proceeds from sales of assets                                                                756                99
   Sales (purchases) of leasehold interests                                                    (503)              231
   Purchases of investment instruments                                                         (910)           (1,390)
   Sales/maturities of investment instruments                                                   913             1,436
   Other - net                                                                                  (57)               21
                                                                                             ------            ------
            Net cash used in investing activities                                            (2,307)           (1,260)

FINANCING ACTIVITIES
   Borrowings having original terms in excess
      of three months
         Proceeds                                                                               427               125
         Repayments                                                                            (216)             (250)
   Net decrease in other borrowings                                                            (156)             (481)
   Purchases of common stock                                                                    (74)              (59)
   Dividends paid to the company's stockholders
      Common                                                                                   (676)             (638)
      Preferred                                                                                 (32)              (34)
   Dividends paid to minority shareholders                                                      (64)              (49)
                                                                                             ------            ------
      Net cash used in financing activities                                                    (791)           (1,386)

CASH AND CASH EQUIVALENTS
   Effect of exchange rate changes                                                               (8)               (3)
                                                                                             ------            ------
   Increase (decrease) during period                                                            (60)              402
   Beginning of year                                                                            511               501
                                                                                             ------            ------
   End of period                                                                             $  451            $  903
                                                                                             ======            ======



<FN>

          See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                       -3-
<PAGE>


                      TEXACO INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

Note 1. Discontinued Operations
-------------------------------

On February  29,  1996,  Texaco  completed  the  disposition  of its  operations
classified as  discontinued  operations by completing  the sale of its worldwide
lubricant additives business to Ethyl Corporation for $136 million in cash and a
three-year note with a face amount of $60 million.

Revenues for the discontinued  operations  totaled $33 million for the first two
months of 1996, representing activities through the sale date.

 Discontinued operations had no significant impact on the 1996 results.




Note 2. Inventories
-------------------

The  inventories of Texaco Inc. and  consolidated  subsidiary  companies were as
follows:

<TABLE>
<CAPTION>

                                                                                                 As of
                                                                               ---------------------------------------
                                                                               September 30,              December 31,
                                                                                   1997                       1996
                                                                               ------------               ------------
                                                                                (Unaudited)
                                                                                         (Millions of dollars)

<S>                                                                              <C>                        <C>   
     Crude oil                                                                   $  378                     $  296

     Petroleum products and petrochemicals                                          891                        904

     Other merchandise                                                               46                         58

     Materials and supplies                                                         222                        202
                                                                                 ------                     ------

          Total                                                                  $1,537                     $1,460
                                                                                 ======                     ======
</TABLE>




Note 3. Contingent Liabilities
------------------------------

Information  relative to commitments  and contingent  liabilities of Texaco Inc.
and  subsidiary  companies  is presented in Notes 14 and 16, pages 63-64 and 67,
respectively, of Texaco Inc.'s 1996 Annual Report to Stockholders.

With respect to the U.S. Internal Revenue Service (IRS) claims discussed in Note
16, page 67, of Texaco Inc.'s 1996 Annual Report to  Stockholders,  on April 21,
1997,  the U.S.  Supreme  Court  decided not to review the decisions of the U.S.
Court of Appeals for the Fifth  Circuit and the U.S. Tax Court in the  so-called
"Aramco  Advantage"  case.  As a result of this  decision by the Supreme  Court,
Texaco  recognized  an after-tax  earnings  benefit of $488 million in the first
quarter 1997, representing the refund of the balance of deposits made to the IRS
in previous years for potential tax claims and accrued interest. In August 1997,
Texaco received approximately $770 million,  which represents  substantially all
amounts recoverable by the company.

                                   ----------



                                      - 4 -

<PAGE>

In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to contingent  liabilities and commitments,
including lawsuits,  claims,  guarantees,  taxes and regulations,  the aggregate
amount of such liability in excess of financial  reserves is not  anticipated to
be materially  important in relation to the consolidated  financial  position or
results of operations of Texaco Inc. and its subsidiaries.




Note 4. Caltex Group of Companies
---------------------------------

Summarized  unaudited  financial  information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron  Corporation,  is presented  below and is
reflected on a 100% Caltex Group basis:

<TABLE>
<CAPTION>

                                                                       For the nine months      For the three months
                                                                       ended September 30,       ended September 30,
                                                                       -------------------       -------------------
                                                                        1997       1996          1997       1996
                                                                        ----       ----          ----       ----
                                                                                    (Millions of dollars)

<S>                                                                   <C>        <C>            <C>        <C>    
                  Gross revenues                                      $13,217    $13,385        $ 4,090    $ 4,225

                  Income before income taxes                          $   859    $ 1,945        $   220    $   221

                  Net income                                          $   556    $ 1,082        $   170    $    93
</TABLE>



On April 2, 1996, Caltex Petroleum Corporation  ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum  Refining  Company,  Limited to its partner
Nippon Oil Company  for  approximately  $2  billion.  Caltex' net income for the
second  quarter of 1996  included a gain of $621  million  associated  with this
sale.

Effective  April 1, 1997,  Caltex' 40%  interest in its Bahrain  refining  joint
venture  (Bapco)  was  sold  to  the  government  of the  State  of  Bahrain  at
approximately net book value.

On June 17,  1997,  Caltex  received  a claim  from the IRS for $292  million in
excise taxes,  plus  penalties and interest.  The IRS claim relates to crude oil
sales to Japanese  customers  beginning in 1980. Prior to 1980,  Caltex directly
supplied  crude oil to its Japanese  customers.  In 1980,  a Caltex  subsidiary,
Caltex Trading and Transport Corporation,  also became a contractual supplier of
crude  oil to the  Japanese  customers.  The IRS  position  is that  this  was a
transfer of property,  and thus  taxable.  Caltex is  challenging  the claim and
fully expects to prevail,  since the addition of another  supplying  company was
not a taxable  event.  Additionally,  Caltex  believes  the claim is based on an
overstated value. Finally,  Caltex disagrees with the imposition and calculation
of interest and penalties.  Just as Caltex  believes the  underlying  excise tax
claim is wrong,  Caltex also believes the related claim for  approximately  $140
million in penalties is equally  wrong and the IRS claim for almost $1.6 billion
in interest charges is flawed.  Caltex believes that the likelihood that it will
pay these charges is remote.





                                      - 5 -
<PAGE>

Note 5.  Stockholders' Equity
-----------------------------

On July 25, 1997, the company's Board of Directors  approved a two-for-one split
of the company's common stock,  effective September 29, 1997. All data presented
in this Form 10-Q reflect the impact of the stock split.

The Board's action  followed the approval by  shareholders at the company's 1997
Annual Meeting to increase the number of authorized common shares to 700,000,000
and halve the par value to $3.125 per share.


Note 6.  Subsequent Event - Acquisition of Monterey Resources, Inc.
-------------------------------------------------------------------

On November 4, 1997, the shareholders of Monterey  Resources,  Inc. approved the
merger of Monterey with Texaco, in a transaction  valued at $1.4 billion.  Under
the terms of the merger,  Monterey shareholders received 0.3471 shares of Texaco
common stock for each share of Monterey common stock. As a result, Texaco issued
approximately 19 million  additional shares of Texaco common stock. In addition,
Texaco assumed Monterey's existing debt of approximately $300 million.

The merger  will be recorded by Texaco as a purchase  business  combination  for
accounting and financial reporting purposes.  The pro forma effect of the merger
on revenues,  consolidated  net income and net income per share of Texaco common
stock for nine months, 1997 and prior periods is not material.



                              * * * * * * * * * * *



In the determination of preliminary and unaudited  financial  statements for the
nine-month and three-month  periods ended September 30, 1997 and 1996,  Texaco's
accounting policies have been applied on a basis consistent with the application
of such  policies in  Texaco's  financial  statements  issued in its 1996 Annual
Report  to  Stockholders.   In  the  opinion  of  Texaco,  all  adjustments  and
disclosures  necessary  to present  fairly the  results of  operations  for such
periods have been made. These adjustments are of a normal recurring nature.  The
information  is subject to year-end  audit by  independent  public  accountants.
Texaco makes no forecasts  or  representations  with respect to the level of net
income for the year 1997.






                                      - 6 -
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------



RESULTS OF OPERATIONS
---------------------

Total  worldwide  net income for Texaco Inc. and  subsidiary  companies  for the
third quarter of 1997 was $490 million, or $.91 per share, as compared with $434
million,  or $.80 per share, for the third quarter of 1996. Total net income for
the first  nine  months of 1997 was  $2,041  million,  or $3.84  per  share,  as
compared with $1,509 million,  or $2.81 per share,  for the first nine months of
1996. Per share amounts reflect the two-for-one stock split, effective September
29, 1997. Both nine month periods included special items.

For the first nine months of 1997,  net income  before  special items was $1,422
million,  or $2.65 per share,  as  compared  with $1,285  million,  or $2.38 per
share, for the first nine months of 1996.

Significantly improved downstream results and upstream production gains were key
contributors to strong third quarter 1997 earnings.  During the third quarter of
1997:

     o  Net income rose 13 percent to $490 million.
     o  Worldwide production rose three percent.
     o  Branded gasoline sales in the U.S. increased six percent.
     o  Quarterly dividend increased six percent to $.45 per share.
     o  Year-to-date  capital  and  exploratory  expenditures grew 34 percent to
        $3.0 billion.

The solid  third  quarter  performance  reflects  the  momentum  that  Texaco is
building.  Downstream earnings  significantly improved in the third quarter this
year.   Increased   refinery   throughput  and  higher  gasoline  sales  volumes
complemented higher margins.  Upstream earnings for the third quarter were below
last year due to the  impacts  of lower  crude  prices  and  higher  exploratory
activities. However, these factors were partially offset by higher production in
the Partitioned  Neutral Zone, the addition of production from the U.K.  Captain
field and higher U.S. natural gas prices.

Two major upstream  initiatives  announced during the third quarter  demonstrate
Texaco's  commitment to enhance  shareholder value. Texaco continues its efforts
to  strengthen  its  competitive  position in the global energy  market.  Texaco
acquired a 20 percent interest in the giant  Karachaganak field in Kazakstan and
on  November  4,  1997,  completed  the  merger  with the  California  heavy oil
producer,  Monterey Resources, Inc. Each will add significantly to the company's
growing  worldwide  production and reserve base. The two-for-one stock split and
the six percent quarterly common stock dividend increase are further evidence of
Texaco's continued confidence in its ability to grow earnings and cash flow.






                                      - 7 -
<PAGE>

Results for 1997 and 1996 are  summarized  in the  following  table.  Details on
special items are included in the functional analysis which follows this table.

<TABLE>
<CAPTION>

                                                                                            (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                          1997          1996           1997          1996
                                                                          ----          ----           ----          ----
                                                                                       (Millions of Dollars)

<S>                                                                     <C>            <C>           <C>           <C>   
Net income before special items                                         $1,422         $1,285        $  490        $  434
                                                                        ------         ------        ------        ------
Gains on major asset sales                                                 174            224             -             -
Financial reserves for various issues                                      (43)             -             -             -
U.S. tax issue                                                             488              -             -             -
                                                                        ------         ------        ------        ------
                                                                           619            224             -             -
                                                                        ------         ------        ------        ------
Total net income                                                        $2,041         $1,509        $  490        $  434
                                                                        ======         ======        ======        ======
</TABLE>




                               OPERATING EARNINGS


PETROLEUM AND NATURAL GAS
     EXPLORATION AND PRODUCTION
        United States

Exploration  and  production  earnings in the U.S. for the third quarter of 1997
were $232 million,  as compared with $262 million for the third quarter of 1996.
For the nine month periods of 1997 and 1996, earnings were $732 million and $772
million, respectively. Results for 1997 included a second quarter special charge
of $43 million  for the  establishment  of  financial  reserves  for royalty and
severance tax issues.  Excluding the special charge, results for the nine months
of 1997 totaled $775 million.

In the U.S.  upstream,  third quarter 1997 earnings were below last year's level
as the  benefits of higher  natural gas prices  could not offset lower crude oil
prices and higher  operating  expenses  associated  with  increased  activities.
Average  realized crude oil and natural gas prices for the third quarter of 1997
were $16.56 per barrel and $2.13 per thousand cubic feet (MCF); $1.37 per barrel
lower and $.11 per MCF higher than 1996.  Ample  worldwide  supply levels led to
the weaker crude oil prices.

Earnings  before special items for nine months of 1997 were slightly above 1996.
Higher  realized  commodity  prices offset lower gas trading  results and higher
expenses associated with increased operating and exploratory activities. Average
realized  crude oil and  natural  gas prices for nine months of 1997 were $17.71
per barrel and $2.28 per MCF; $.47 per barrel and $.20 per MCF higher than 1996.
Production  gains  from new and  existing  fields,  particularly  in the Gulf of
Mexico and Louisiana, offset declines from maturing fields.

         International

Exploration  and production  earnings  outside the U.S. for the third quarter of
1997 were $103  million,  as compared with $132 million for the third quarter of
1996.  For the nine month  periods of 1997 and 1996,  earnings were $499 million
and $365 million, respectively. Results for 1997 included second quarter special
gains of $161  million  from the sales of a 15 percent  interest  in the Captain
Field in the U.K.  North Sea,  an interest in  Canadian  gas  properties  and an
interest in an  Australian  pipeline  system.  Excluding  these  special  gains,
results for the nine month period of 1997 totaled $338 million.





                                      - 8 -
<PAGE>

In the  international  upstream,  third  quarter and nine  months 1997  earnings
before  special items were below 1996 levels.  Improved  production  only partly
offset the cost of Texaco's  expanded  exploration  programs,  lower gas trading
results in the U.K. and lower crude prices.  Average  realized  crude oil prices
were $16.88 per barrel for the third  quarter and $17.79 per barrel for the nine
months 1997; $2.55 and $.85 per barrel below 1996 prices.

Production in 1997 increased 10 percent over last year. New production  from the
Captain field in the U.K.  North Sea and record  production  in the  Partitioned
Neutral Zone contributed to the increase.  Also, new activities  coming onstream
late in 1996 in the Bagre field offshore  Angola and in the Danish North Sea led
to higher liquids production this year. Natural gas production in 1997 benefited
from a full nine months of  operations at the Dolphin field in Trinidad and from
the Chuchupa "B" field in Colombia.

Results for the third quarter and nine months of 1997 included  noncash currency
benefits of $13 million and $26 million,  respectively,  due to the weakening of
the Pound Sterling  versus the U.S.  dollar  relating to deferred  income taxes,
compared to minimal charges in 1996.

     MANUFACTURING, MARKETING AND DISTRIBUTION

         United States

Manufacturing,  marketing  and  distribution  earnings in the U.S. for the third
quarter of 1997 were $132  million,  as compared  with $94 million for the third
quarter of 1996. For the nine month periods of 1997 and 1996, earnings were $238
million  and $242  million,  respectively.  Results  for 1997  included a second
quarter special gain of $13 million from the sale of credit card operations.
Excluding  the  special  gain,  results  for the nine  months  of 1997 were $225
million.

In the U.S.  downstream,  strong  gasoline  demand  bolstered third quarter 1997
margins.  Gulf Coast sour crude  cracking  margins also were higher in the third
quarter of 1997,  maintaining the strength shown  throughout the year.  Improved
refinery  operations  and higher  gasoline  sales  volumes also  benefited  1997
results.

During the first nine  months of 1997,  Gulf Coast sour crude  cracking  margins
were higher than last year. However, weaker West Coast margins in the first half
of the year contributed to the lower earnings for the nine months of 1997 versus
the  same  period  in  1996.  Last  year,  regional  refining  problems  and new
California  gasoline   formulation   requirements  caused  a  supply  disruption
resulting  in margin  increases  that peaked in the second  quarter of 1996.  In
1997,  competitive  pressures and increased  costs  dampened West Coast margins;
however,   third  quarter  margin  increases  resulted  in  a  modest  recovery.
Additionally,  the impact of  refinery  fires late in 1996 and early 1997 at the
Los Angeles, California refinery resulted in property damage and processing unit
downtime  in the first  quarter of 1997.  Lower  crude oil  trading  margins and
clean-up  costs  from the May  pipeline  break  in Lake  Barre,  Louisiana  also
contributed to the decline in 1997 earnings.

         International

Manufacturing,  marketing  and  distribution  earnings  outside the U.S. for the
third  quarter of 1997 were $134  million,  as compared with $37 million for the
third  quarter of 1996.  For the nine month  periods of 1997 and 1996,  earnings
were $370 million and $433  million,  respectively.  Results for 1996 included a
second quarter  special gain of $224 million for Caltex' sale of its interest in
a  Japanese  affiliate,   including  the  tax  portion  of  the  sales  proceeds
distributed  to the  shareholders.  Excluding the special gain,  results for the
nine months of 1996 totaled $209 million.

In the international  downstream,  the strong 1997 earnings before special items
reflected  higher  manufacturing  and marketing  results.  The refining  segment
experienced improved margins and lower expenses. Improved U.K. marketing results
reflected a recovery from significantly depressed 1996 margins.  Increased sales
volumes and stronger  marketing margins in Latin America also contributed to the
higher  earnings.  Lower  results in  Scandinavia,  primarily  from  competitive
pressures in the Norwegian marketplace, partly offset these improvements.




                                      - 9 -


<PAGE>

In the Caltex area of  operations,  third quarter and nine months 1997 benefited
from higher earnings in Korea through improved petrochemical  results,  refining
margins and higher refined  product  sales.  Currency  devaluations,  notably in
Thailand, Malaysia and the Philippines,  have caused an erosion in third quarter
marketing margins due to the inability to fully recover feedstock costs.  Prices
are being raised to restore  margins as quickly as market forces and regulations
permit.  In the third quarter,  favorable  balance sheet  currency  translations
caused by the devaluations more than offset related product margin declines.

NONPETROLEUM

Nonpetroleum earnings for the third quarter of 1997 were $3 million, as compared
with $6 million  for the third  quarter of 1996.  For the nine month  periods of
1997 and 1996, earnings were $16 million and $11 million, respectively.


                         CORPORATE/NONOPERATING RESULTS

Corporate  and  nonoperating  charges  for the third  quarter  of 1997 were $114
million,  as compared with charges of $97 million for the third quarter of 1996.
Corporate  and  nonoperating  earnings  for the nine  months  of 1997  were $186
million,  as compared  with charges of $314 million for the nine months of 1996.
Results  for 1997  included a first  quarter  special  benefit  of $488  million
associated with the "Aramco  Advantage"  U.S. tax case.  Excluding this benefit,
corporate and  nonoperating  charges totaled $302 million for the nine months of
1997.

During  the  third  quarter  1997,   corporate   expenses   increased  with  the
introduction of a new advertising campaign. Comparative nine months 1997 results
benefited  from reduced  interest  expense due to lower debt levels and slightly
lower  interest  rates.  Additionally,  1997  included  higher gains on sales of
marketable securities held for investment by insurance operations.









                                     - 10 -

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Texaco's cash, cash equivalents and short-term  investments were $499 million at
September 30, 1997, as compared  with $552 million at year-end  1996.  Cash from
operations totaled $3.05 billion and included the receipt of the IRS refund.

During 1997,  cash from  operations,  together  with  proceeds  from the sale of
nonstrategic assets of $756 million, exceeded outlays for Texaco's significantly
higher  capital  and  exploratory  program of $2.5  billion  and the  payment of
common, preferred and minority interest dividends of $772 million.

At  September  30,  1997,  Texaco's  ratio of total debt to total  borrowed  and
invested  capital  was 31.5%,  as  compared  with  33.6% at  year-end  1996.  At
September 30, 1997,  Texaco's  long-term  debt included  $1,056  million of debt
scheduled to mature  within one year,  which the company has both the intent and
the  ability to  refinance  on a  long-term  basis.  The  company  maintained  a
revolving credit facility with commitments of $1.5 billion,  which was unused at
both September 30, 1997 and at year-end 1996.

The company issued $150 million of 7.09% Noncallable Notes Due 2007 in the first
quarter and $200 million of 3.50% Cash-Settled Convertible Notes Due 2004 in the
third quarter.  Concurrently  with the issuance of the Cash-Settled  Convertible
Notes,  the company entered into an arrangement  that converts its interest cost
into a LIBOR-based  floating rate and limits  Texaco's cost of conversion to the
face amount of these Notes.  Proceeds from these offerings were used for working
capital, retirement of existing debt and other general corporate purposes.

During the first nine  months of 1997,  the  company  purchased  $74  million of
common stock under the $500 million common stock repurchase program announced in
1995.  This brings  total  purchases  under this  program to $237  million.  The
company  will  continue  repurchasing  shares  from time to time based on market
conditions.

During the first nine months of 1997, the company completed the following sales:

       o In March,  Texaco exercised an option to terminate a lease  arrangement
         and obtained ownership of the assets used in its propylene oxide/methyl
         tertiary  butyl  ether   (PO/MTBE)   business.   Concurrent  with  this
         transaction, Texaco sold the PO/MTBE business to a Huntsman Corporation
         affiliate  for cash and  preferred  stock.  The cash  proceeds  of $512
         million were used to  substantially  offset the cost of exercising  the
         option.  The preferred  stock,  with a stated value of $65 million,  is
         mandatorily redeemable in eleven years.

       o During  April,  the company sold a 15%  interest in its U.K.  North Sea
         Captain   Field  to  an  affiliate  of  Korea   Petroleum   Development
         Corporation for approximately  $210 million.  Of this total amount, $20
         million was received during the first quarter of 1996.

       o In  April,  the  company  sold  its  interests  in  certain   producing
         operations in Canada for approximately $80 million.

       o In May, the company sold its credit card services  unit,  including its
         portfolio  of  proprietary   credit  card  accounts   receivable,   for
         approximately $300 million.






                                     - 11 -
<PAGE>

On August 12, 1997, Texaco repurchased  certain equipment leasehold interests in
conjunction with a sale/leaseback  arrangement for $522 million,  which was less
than the sales proceeds previously received.

On July 25, 1997,  Texaco's Board of Directors  approved a two-for-one  split of
the company's  common  stock,  effective  September  29, 1997.  The company also
increased its quarterly  dividend on its common stock to 45 cents per share from
42.5 cents per share, on a split basis, representing an increase of 5.9 percent.

On November 4, 1997, the shareholders of Monterey  Resources,  Inc. approved the
merger of Monterey with Texaco.  (See Note 6, Subsequent  Event - Acquisition of
Monterey Resources,  Inc. for additional  information on this transaction.) As a
result of the merger,  Texaco issued  approximately 19 million additional shares
of Texaco common stock and assumed  Monterey's  existing  debt of  approximately
$300 million.

The company considers its financial position  sufficient to meet its anticipated
future financial requirements.


EMPLOYEE SEVERANCE PROGRAM
--------------------------

On  October  30,  1996,   Texaco   announced  a  companywide   realignment   and
consolidation  of its  operations  designed to enhance the company's  ability to
grow  existing and new  businesses.  An  after-tax  provision of $56 million was
recorded  in the  fourth  quarter  of  1996  to  cover  the  costs  of  employee
separations,  including  employees of  affiliates.  Through  September 30, 1997,
approximately  870 employees have been terminated  with a related  commitment to
severance payments of $39 million after-tax. Of this commitment, payments of $30
million have been made and charged  against the reserve.  The remaining  reserve
balance  will  be  used  for  ongoing  employee   separation  benefits  relating
principally to affiliates, for which Texaco is responsible.


NEW ACCOUNTING STANDARD
-----------------------

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) 128, Earnings per Share. Under SFAS 128,
companies  currently  required to report primary and fully diluted  earnings per
share (EPS), will instead report basic and diluted EPS, respectively. Currently,
primary EPS considers the average  number of common shares  outstanding  and the
potential  dilution  that would  result if  conversion  rights  associated  with
certain outstanding  securities were exercised.  Fully diluted EPS considers all
potentially dilutive securities. Basic EPS, which will replace primary EPS, does
not consider any potential dilution. Diluted EPS is essentially similar to fully
diluted EPS.

Texaco must adopt SFAS 128 for its fiscal year 1997 financial statements and, at
that  time,  restate  the per share  amounts  of prior  periods.  Amounts  to be
reported as basic and diluted EPS in accordance  with the new Statement will not
differ significantly from previously reported primary and fully diluted EPS.


CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------

Capital and exploratory  expenditures,  including equity in such expenditures of
affiliates,  were $3,023  million for the first nine months of 1997, as compared
to $2,252 million for the same period of 1996.

Increased U.S.  exploration  and production  expenditures  in 1997 reflected the
continued focus on strategic  projects both onshore and offshore,  especially in
the deepwater Gulf of Mexico.  Platform construction and development drilling is
underway in the Petronius and Arnold fields while delineation drilling continues
in the Fuji and Gemini prospects. Additionally, enhanced oil recovery efforts in
California and drilling and  development  programs in the  traditional  offshore
shelf area and onshore increased investments.  Construction continued during the
third quarter on a jointly-owned  natural gas pipeline and processing complex in
the Gulf Coast area.




                                     - 12 -
<PAGE>

Internationally, exploration and production expenditures in 1997 were 30 percent
higher  than last year.  During the third  quarter  1997,  Texaco  acquired a 20
percent interest in Kazakstan's giant Karachaganak oil and gas field. One of the
largest  oil and gas  fields in the world,  the  Karachaganak  field  holds huge
quantities of recoverable  reserves.  Development  work in Indonesia  continued,
including  expenditures  for enhanced oil recovery  installations.  In the U.K.,
North Sea  activities in the Galley and Mariner  fields moved forward while work
in the Erskine field neared completion with initial production starting in early
November, 1997. Exploration  activities expanded  with  significant  spending in
China,  Indonesia and Nigeria.

Downstream  expenditures  outside  the U.S.  showed a  significant  increase  in
marketing  investments for facilities and service station  reimaging  throughout
the  Asia-Pacific  area by Texaco's  affiliate,  Caltex  Petroleum  Corporation.
Marketing  investments  throughout  Latin America also  increased as compared to
1996.










                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------

Reference is made to the  discussion of Contingent  Liabilities in Note 3 to the
Consolidated  Financial  Statements  of this Form 10-Q,  Item 1 of Texaco Inc.'s
Forms 10-Q for the quarterly  periods ended March 31, 1997 and June 30, 1997 and
to  Item 3 of  Texaco  Inc.'s  1996  Annual  Report  on  Form  10-K,  which  are
incorporated herein by reference.







                                     - 13 -
<PAGE>

Item 5. Other Information
-------------------------
<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                          1997          1996           1997          1996
                                                                          ----          ----           ----          ----
                                                                                        (Millions of dollars)
<S>                                                                     <C>            <C>           <C>           <C>    
FUNCTIONAL NET INCOME
---------------------
Operating earnings
   Petroleum and natural gas
      Exploration and production
         United States                                                 $   732         $  772        $  232         $  262
         International                                                     499            365           103            132
                                                                        ------         ------        ------        -------
           Total                                                         1,231          1,137           335            394
                                                                        ------         ------        ------        -------
      Manufacturing, marketing and distribution
         United States                                                     238            242           132             94
         International                                                     370            433           134             37
                                                                        ------         ------        ------        -------
           Total                                                           608            675           266            131
                                                                        ------         ------        ------        -------

           Total petroleum and natural gas                               1,839          1,812           601            525

   Nonpetroleum                                                             16             11             3              6
                                                                        ------         ------        ------        -------
           Total operating earnings                                      1,855          1,823           604            531

Corporate/Nonoperating                                                     186           (314)         (114)           (97)
                                                                        ------         ------        ------        -------

           Total net income                                             $2,041         $1,509        $  490         $  434
                                                                        ======         ======        ======        =======

CAPITAL AND EXPLORATORY EXPENDITURES -
--------------------------------------
     INCLUDING EQUITY IN AFFILIATES
     ------------------------------
   Exploration and production
         United States                                                  $1,272        $   894        $  491        $   273
         International                                                     990            762           444            312
                                                                        ------         ------        ------        -------
           Total                                                         2,262          1,656           935            585
                                                                        ------         ------        ------        -------
   Manufacturing, marketing and distribution
         United States                                                     246            234            94             78
         International                                                     486            345           178            144
                                                                        ------         ------        ------        -------
           Total                                                           732            579           272            222
                                                                        ------         ------        ------        -------

   Other                                                                    29             17            18              8
                                                                        ------         ------        ------        -------
           Total, including equity in affiliates                        $3,023         $2,252        $1,225        $   815
                                                                        ======         ======        ======        =======

   Texaco Inc. and subsidiary companies
   Exploratory expenses included above:
         United States                                                 $   122        $   112       $    46       $     45
         International                                                     184            131            68             39
                                                                        ------         ------        ------        -------
           Total                                                       $   306        $   243        $  114       $     84
                                                                       =======        =======        ======       ========
</TABLE>



                                     - 14 -


<PAGE>

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                                             -----------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1997            1996         1997            1996
                                                                         ----            ----         ----            ----
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------
Exploration and Production
--------------------------

United States
-------------
<S>                                                                     <C>            <C>           <C>            <C>   
     Net production of crude oil and natural
         gas liquids (000 BPD)                                             387            388           391            393
     Net production of natural gas - available
         for sale (000 MCFPD)                                            1,686          1,680         1,722          1,708
     Total net production (000 BOEPD)                                      668            668           678            678

     Natural  gas sales (000 MCFPD)                                      3,570          3,100         3,312          3,059
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                         189            208           189            191

     Average U.S. crude (per bbl)                                       $17.71         $17.24        $16.56         $17.93
     Average U.S. natural gas (per mcf)                                 $ 2.28         $ 2.08        $ 2.13         $ 2.02
     Average WTI (Spot) (per bbl)                                       $20.83         $21.30        $19.78         $22.41
     Average Kern (Spot) (per bbl)                                      $14.81         $14.92        $14.30         $14.41

International
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)
         Europe                                                            116            115           118            115
         Indonesia                                                         148            143           150            146
         Partitioned Neutral Zone                                           94             75            97             79
         Other                                                              67             62            64             65
                                                                        ------         ------        ------         ------
              Total                                                        425            395           429            405
     Net production of natural gas - available
         for sale (000 MCFPD)
         Europe                                                            197            182           176            162
         Colombia                                                          168            117           190            124
         Other                                                              88             66            79             77
                                                                        ------         ------        ------         ------
              Total                                                        453            365           445            363

     Total net production (000 BOEPD)                                      501            456           503            466

     Natural gas sales (000 MCFPD)                                         562            456           536            450
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                          98             95           107             74

     Average International crude (per bbl)                              $17.79         $18.64        $16.88         $19.43
     Average U.K. natural gas (per mcf)                                 $ 2.68         $ 2.56        $ 2.55         $ 2.55
     Average Colombia natural gas (per mcf)                             $ 1.04         $  .94        $  .95         $  .97
 

</TABLE>

                                     - 15 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                            (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------           -------------------
                                                                         1997           1996          1997            1996
                                                                         ----           ----          ----            ----
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------

Manufacturing, Marketing and Distribution
-----------------------------------------

United States
-------------
<S>                                                                      <C>            <C>           <C>            <C>
     Refinery input (000 BPD)
         Subsidiary                                                        415            405           420            417
         Affiliate - Star Enterprise                                       334            320           339            325
                                                                         -----          -----         -----          -----
              Total                                                        749            725           759            742

     Refined product sales (000 BPD)
         Gasolines                                                         511            499           525            515
         Avjets                                                             95            127           103            122
         Middle Distillates                                                217            214           222            217
         Residuals                                                          82             65           102             70
         Other                                                             115            133           109            132
                                                                         -----          -----         -----          -----
              Total                                                      1,020          1,038         1,061          1,056

International
-------------
     Refinery input (000 BPD)
     Europe                                                                337            336           329            334
     Affiliate - Caltex                                                    400            368           379            340
     Latin America/West Africa                                              59             64            60             68
                                                                         -----          -----         -----          -----
         Total                                                             796            768           768            742

     Refined product sales (000 BPD)
     Europe                                                                496            481           508            496
     Affiliate - Caltex                                                    564            602           545            555
     Latin America/West Africa                                             408            397           440            408
     Other                                                                  62             61            66             39
                                                                         -----          -----         -----          -----
         Total                                                           1,530          1,541         1,559          1,498

</TABLE>


                                     - 16 -
<PAGE>


Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

(a)  Exhibits

     --   (11) Computation of Earnings Per Share  of Common Stock of Texaco Inc.
               and Subsidiary Companies.

     --   (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on  a
               Total Enterprise Basis.

     --   (20) Copy  of  Texaco  Inc.'s  Annual  Report  on  Form  10-K  for the
               fiscal year ended December 31, 1996 (including portions of Texaco
               Inc.'s  Annual  Report to  Stockholders  for the year 1996) and a
               copy of  Texaco  Inc.'s  Quarterly  Reports  on Form 10-Q for the
               quarterly  periods  ended  March 31, 1997 and June 30,  1997,  as
               previously  filed  by the  Registrant  with  the  Securities  and
               Exchange Commission, File  No. 1-27.

     --   (27) Financial Data Schedule.

(b)  Reports on Form 8-K:

     During the third quarter of 1997, the Registrant  filed Current  Reports on
     Form 8-K for the following events:

     1.   July 17, 1997 (date of earliest event reported: July 16, 1997)

          Item 5. Other Events -- reported  that Texaco,  Saudi Aramco and Shell
          Oil Company  signed a memorandum  of  understanding  to combine  their
          Eastern and Gulf Coast U.S. refining and marketing businesses.

     2.   July 22, 1997 (date of earliest event reported: July 22, 1997)

          Item 5. Other Events -- reported that Texaco issued an Earnings  Press
          Release for the second quarter 1997.

     3.   July 25, 1997 (date of earliest event reported: July 25, 1997)

          Item 5. Other  Events -- reported  that  Texaco's  Board of  Directors
          approved  a  two-for-one  split of  Texaco's  Common  Stock  effective
          September 29, 1997. Also reported that the Board voted to increase the
          quarterly  dividend to 90 cents per share (on a pre-split  basis) from
          85 cents per share.

     4.   August 19, 1997 (date of earliest event reported: August 18, 1997)

          Item 5. Other  Events -- reported  that Texaco and Monterey Resources,
          Inc.  announced   that  they  had  signed  an  agreement  to  merge in
          a transaction valued at $1.4 billion.






                                     - 17 -
<PAGE>

                                   SIGNATURES
                                   ----------



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                                                            Texaco Inc.
                                                --------------------------------
                                                           (Registrant)




                                          By:              R.C. Oelkers
                                                --------------------------------
                                                (Vice President and Comptroller)




                                          By:                R.E. Koch
                                                --------------------------------
                                                        (Assistant Secretary)




Date:    November 13, 1997
         -----------------







                                      - 18-